to come to some sort of ruling and essentially force the issue. he would also like to see more things happening. this hearing has been delayed and delayed all summer long. originally there was something that was supposed to happen in april. than it was june and then it was july and now we are being pushed off until september. ..

suppose in their interest to see something happen, but at the same time, i'm not sure it's in anyone's best interest. ultimately, everyone wants to see some resolution. nobody wants to see another trial or like to see more dollars spent, perhaps need leslie to keep this going -- need lessly and hopefully there's more answers on september 15th. >> host: sarah weinman, news editor of publisher's marketplace, thank you. >> next on book tv, nicholas shaxson takes a look at offshore tax havens that cost the u.s. about $100 billion in lost tax

revenue each year. this is about an hour and 20 minutes. >> okay. good morning, everybody. thank you so much for coming. i'm sarah prey, and i'd like to welcome you this morning. as you likely noted, the event is being filmed by c-span, live web cast, and also filmed for booktv. for those of you who don't know the open society foundation, it's an organization focusing on good gofer nans and it promotes greater accountability and transparency within financial institutions, corporations, and government, so the fact coalition focuses on closing tax loopholes requiring business ownership information, strengthening money

loppedderring laws and making important tax contributions more. allow me to briefly outline the problem that rebecca and nicklaus will discuss today. the u.s. love $108 billion in texas reeve knew, and that's every year. they are housing $1.2 trillion of unrepatriated foreign profits offshore meaning they lost $400 million on these profits, that's staggering. why should we care? the first reason to care about the issue comes, i think, from a place of fairness. you might have seen on john stewart recently, but ge actually got a $3 billion tax credit, so in this current

political and economic climate of slashing budgets and austerity rhetoric, this offends the logical mind. ge is not allow. u.s.-based multinational companies like transocean, xeorox and others contribute as little as possible in the united states. one of the other reasons these organizations care so much about this is because of the exceptional effects it has on developing countries. the global financial and the organization global financial integrity estimates between 2000 and 2008, money flowed out of developing countries, and in the opening chapter of treasure island, nick talkings about the scenario playing out in an oil rich, but dirt poor country in africa and the impact on the

population. the wealth stays in the hands of the powerful while the rest suffer. as nick says, this story is hardly unique and seen it in other resource rich but poor countries. first, nicholas shaxson, author of "treasure islands" uncovering the damage of tax havens and the book is for sale outside the room. he's a british writer, journalist, and investigator and author of the acclaimed 2007 book, "the dirty politics of african oil" a fellow of chadman house, and a writer and researcher for the network group focused on tax and tax havens, and since 1993, he's written extensively on global business and politics for the "financial times" writers, economists, and the intelligence unit among many others. treasure island, which he'll discuss today, takes us through colorful and seedy world that

created what we now refer to as the offshore banking world. one theme throughout the book is the offshore financial system was created in a manner that deliberately avoided political oversight at almost every turn and it is critical our elected leaders take a hard look at it and how it functions now. rebecca wilsons a is at citizens for tax justice, a non-profit working for a fair and sustainable tax system for more than 30 years. she was a cpa for 20 years specializing in taxes and her owning thing firm and understanding inside and out how the offshore financial system lets companies and wealthy individuals shirk pays taxes that we have to pay in order to keep the country running. with that, i'd like to turn it over to nicholas shaxson and thank you again for coming. >> thank you very much.

thank you. i want to really make three main points today. first is that the offshore system of tax havens is much bigger and much more important, much more central to the global economy than almost anybody knows. i think the figures is $100 billion of lost money is important to the united states, but the damage is much, much greater than that. there's areas not just in the area of tax where the u.s. and developing countries are harmed by this system. i will also make the point that you cannot really understand this without understanding that there is a connection as i mentioned and sarah mentioned connections between the united states and the developing countries, the offshore system connects the two in surprising ways, and we need to reconsider what tax havens are and where they are.

most people think of them as small fringed islands in the caribbean, but i will argue that the system is bigger and more important than that. the third element i want to touch on is that tax havens are very fundamentally part of the root cause of the latest crisis and the ensuing economic crisis. those are my three main points for today. i want to start telling a little bit of a story which sarah touched on that comes from the beginning of treasure island, my new book. when i was in -- i went to gabon many years ago, scene of this accident, 1997, and -- 1996 and 1997 to research what was going on in this strange little country, quite oil rich and ran by a dictator, favorite

in the sense that he was, i think, perhaps one of the smartest rulers that i've ever come across. now, as i prepared to go, i received a telephone call from someone in paris i never heard of saying we'd like to help you. i was a little bit nonwilling, but being a journalist i thought it was interesting so i'll see what he has to say, and he said, you know, when you arrive, give me a call. when i arrived he and an assistant had flown out first class air france tickets, and the mission was to look after me and make sure that i spoke to the right people and spoke to them in the right way, and his job was to fill up my call collar essentially is what i later discovered. what i didn't know then, i had actually stumbled into something that later became known as the

health affair which was something uncovered by some investigators in paris and turned out to be the biggest corruption investigation in european post-war history, and i arrived in gabon at a very sensitive time. why was it significant? essentially, the french stated oil company and they had created a system that connected up the political elites of france with the political elites of gabon in a giant system of corruption what they wanted was a system of financing that was not happening in fraps that was overseas, in a sense, offshore, and they would do it using african oil, specifically african oil, not just that, but that was kind of the lynch pen of it, and so you had a secret financing system financing political parties both

from the right and the left in france, and this financing system, the money was flowing out of gabon and other oil rich countries where elf had operations like angola. it was a giant slush fund and thanks to the assistance of one participant in in the beginning in particular that this system was uncovered. it was kind of an open secret among the french elites that there was this system, but nobody brought it out to the light of day, and this was used for paying bribes with french companies trying to win contracts. the corruption spread around the world. they uncovered huge deals in venezuela, taiwan, germany, all over the place. i began to realize i think we had always seen the problem of corruption in after --

africa as an african thing, and when people analyze corruption, they look at each individual country and say, you know, nigeria, there's awful corruption going on, what do we do about it? when i stumbled on to the affair and saw what's coming out that i began to understand that it really is interconnected. the rich countries and the poor countries are connected in this system. now, gabon is not known as a tax haven, but it was very much in a sense this was an justify shore structure where the elites could go to another country not bound by french laws and do things they were not allowed to do at home. this was one of the essential points that needs to be understood about what a tax haven is and what offshore means. there is no general agreement as to what tax havens are, and

there's another term which is becoming popular, and i like to use it sometimes, secrecy jurisdiction. one of the reasons i like it is tax havens are so much more than tax. it's $100 billion lost not united states. it's just one part of the damage that the u.s. is suffering. tax havens ultimately what they are about is escape. they are about escape from your rules, local rules, where you live, where you do business, you take your money somewhere else, and you are no longer bound by those rules, and the particular offering -- of course lower zero taxes, whatever, is one part of it, secrecy a obviously another huge part of it, and opt out from criminal laws, where you are. you can go somewhere else, and you can do things you're not allowed to do at home. the alpha affair is a classic example of that. all of these are forms of

escape, but these are forms of escape that are almost exclusively used by wealthy elites in these countries. if we're looking at the problem of corruption in africa, we cannot understand it without knowing where the money goes. one of the most famous corruption indexes, ranking rungs is transparency international corruption index, and you will find ranked at the top, the world's most corrupt countries are very much african countries, developing countries, and the least corrupt countries will be rich countries. now, the current index has at the top of the list the so-called cleanest countries. there are three first equal singapore and new zealand, and they are both tax havens.

singapore is a particularly dirty sing hole for global money. there's been the uvs scandal in the u.s., and the u.s. has taken some action against swiss banks, as a result of this, wealthy individuals around the world are putting their money into asia because they think they are going to getless scrutiny there. fortunately the latest case where the u.s. has been discovered, the u.s. department of justice probed accounts in india, the focus is shifting. the point is there's something wrong with the dirtiest sink hole is at the top of the list of the so-called cleanest countries. we need to understand the system and look at it from a global perspective. now, after i left gabon, i had

been researching oil and politics for many years and started in angola in 1993 when it was at war, and i remember this money, huge amounts of money from the oil industry and wondering where it went, and there were tax havens and everybody suspected it was dumped offshore, but i never understood the system. it was only until many years later, my first real awakening was when i melt someone called david spencer in new york, and he -- we were talking about corruption. he's an attorney in new york, and he started talking to me about tax exemptions on bond income and things like that, and i was trying to work out what this had to do with corruption, and it became -- he made a clear that the united states had been using, setting itself up up, itself as a tax haven offering

loopholes to foreigners as a mean to reach deficits, and we're talking huge sums of money. that's when it began to click with me that this global system was not what i thought it was. it is something bigger than i had ever imagined. it's just not a few exotic islands taking money from wealth people, but something more essential. the figure mentioned was an annual figure. that latest report coming out in january estimated that in 2008, there were $1.2 trillion, that's trillion, in financial outflows from developing countries. if you compare that to figures for foreign aid, that is as raymond baker points out, that

is for every one dollar of foreign aid you put in developing countries, $10 comes out from under the table, and a lot flows into the united states. recently, there was a group of 25 florida senators stood up lobbying on behalf of the florida banking industry, and they were complaining about the united states as being a place that cooperates with other countries to try to help the countries tax citizens and prevent the citizens from committing crime. these florida senators didn't want that. they came up with a figure, a lobbyiest figure indeed, make of it what you will, but they said just because of the privacy laws of the united states, in other words the secrecy laws,$3 trillion sitting in u.s. banks, and they say this is good for the united states. they say this a good stuff. i'm going to argue a little bit

later this is extremely harmful stuff and harmed ordinary americans, and this has been one the great causes of the financial crisis as i will explain, but before i get into that, i want to touch on something else that relates to my own country, britain. we in britain, i think, are now starting to wake up that we have the same problem as you in the united states has which is that we are a tax hatch too, and we have -- tax haven too and have done something absolutely extraordinary. the united kingdom, and particularly the city of london as i argue in treasure island in itself has many tax haven, many offshore characteristics that attract money. ultimately what the city of london does is offer escape roots. for if you offer the roots, foreigners bring their money to you. bring your money to london, and you can escape financial

regulation, you can escape taxes, you can escape all sorts of things, but that's just a part of the picture. me and a couple of researchers went into the archives at u.k. and looked at what happened after independence, what the discussions were about what was happening to the so-called overseas territories, the british oversea territories and the crowned dependencies. it included places like the cayman islands, and other tax havens today, the islands are huge, but some means the world's 5th largest financial center. these territories never became independent from britain, just partly independent, but britain plays a very careful role, hands-off, but reassuring

controlling role behind the scenes. these overseas territories, the governor is appointed by the queen, and if you go there, british influence is everywhere. these are british tax havens, and this is a city of london playing a very powerful game, and what they do, these places, we uncovered a kind of division within the british government as these jurisdictions were starting to become independent and starting to become semiindependent and there was general decolonizeing going on. there was a division between the people in the u.k. treasury and particularly the revenue authority, particularly worried about we're going to lose money to these tax hatchings and get our wealthy citizens, british people putting money juve

shore. on the other side you had two bodies, one the bank of england supporting the development of tax havens, and here's a document from the or vives in 1969. it says, "we need therefore to be quite sure the prorifflation of banks ect. which in most cases is no more than brass plates doesn't get out of hand. there's no objection to their providing loopholes for nonresidents." it sums up the attitudes, and you find going through the archives in the bank of england again and again. we don't care what happens to other countries. we don't want to lose control of the situation, lose too much revenue to the places, but as long as we are safe, screw everybody else as long as they bring their money here. the bank of england had leapt, and this is still the case today, that these places became channels, conduits for business,

for assets, and for the business of handling assets towards the city of london. the city of london has a network of havens around the world. not only is it a tax haven in its own right, but cast this web around the world bringing in money, and this attitude, this screw-you attitude pervaded the system ever since. you can do what you like here, we don't care. it's a very nasty picture that i found out in the -- as i was researching this book, and, you know, i have found it in some senses researching it, i have found myself becoming increasingly disappointed with my own country and perhaps the human race that this kind of system can grow up. on one of my -- this stayed so long under the radar for such a

long time. why has it taken so long for few people to dig into this stuff? this is one of the messages i want to get out. now, there is -- two years ago, april 2, 2009, the g20 leaders issued a statement, and they said the era of banking secrecy is over, and they mandated the oecd, club of rich countries, to set up a kind of black, white, and gray list system to short of shame and cojoel the system into being less secretive. that was april 2, 2009. the blacklist was empty by april 7, 2009, five days later. the world's media had put out

this message that they were cracking down on tax havens is how the image stay. if you uncover what actually happened, i don't have time to go into it today, but there's an article in the financial times last week if you want to read some more details about that, but where essentially there's a crackdown on tax hatches, but business as usual. there's been little, little pinpricks in bank secrecy, but the image i use is the oecd was given the mandate to drain a swamp and handed out drinking straws, and that's kind of what it's all about, so we have -- it begins to look very ugly when you see the whole system in this light. now, the united states -- i just want to say one other thing about secrecy. if you consider -- consider how

many individuals have bankinging bank accounts in london? lots of them. how many british people have stashed their money elsewhere? how many americans stash their money? you begin to realize that this is a one-way flow we're talking about. this is money flowing from developing countries on a net basis into developing countries. when you see the scale we're talking about, this trillion, it's ugh leer, all this money coming in and secrecy is the protecter of this one-way flow. secrecy is a big flow, not the only driver, but tax free treatment is another driver of the flows, and the u.s., u.k., and other havens that people don't consider havens, ireland, netherlands, luxumberg is huge,

and the cayman islands is in that group, but consider the islands as conduits, a british thing. so we have these florida senate senators saying this stuff is all good and all this money flowing into the united states must be great. well, i spent -- i was always suspicious of the argument from the beginning. i spent many years in africa looking at these countries, nigh nigeria, angola, seeing tides of money flowing into the countries, and everybody said how come the people are still so poor? there's this thing called the resource curse which it's quite demonstrateble, but in these countries, all this money flowing in does not seem to have made life better for ordinary citizens, and there's a parallel here with what's happening in the u.s. and u.k..

it is very hard for us to make an argument that these hundreds of billions and trillions, literally trillions of dollars washing into the city of london have doned ordinary people of britain. look at the statistics for human indicators, you know, infant mortality, all these things, britain scores very, very low on the list compared to others, germany, france, sweden, our colleagues. we are actually worse off. i argue in the book, i.coop have time for -- i don't have time for great detail, but i argue in my book this is the finance money flowing in, and this is before the crisis happened. this money harmed our country, and i think it's a very similar picture in the united states. this money is floating into real estate into miami, new york, real estate bubbles is one factor behind the crisis.

it has also hugely boosted wall street, these financial flows are a huge underpinning for wall street. the too big to fail problem for wall street banks, the offshore system is a huge part of that, not just because the united states in its own right is a tax haven and money is being sucked in is causing all these problems, but also because wall street has an escape root offshore in other tax hatches where they shake off all the regulations they don't like. they've done that since the 1960s and we've had banks going to london, and london allowed them to do all sorts of things they are not allowed to do at home. shake off an act put in place as a result of the great depression, separating the kind of utility banks, the real banks doing the stuff people need to get investment, and investments

are being called casino banks. wall street couldn't do it at home, so they lent to london. also, caps have been put in place for good democratic reasons. trappings of democracy trying to curve too much finance was shaken off offshore, and that has been one the great reasons why wall street is so powerful today, and we have to understand what a tax haven is, understand the city of london is a tax haven before we can really understand this. ..

so in short, my book, and i don't have time to get into this very strange institution called the city of london corporation. i will look lead you to read the book but that is one of the most bizarre things i have ever come across in my whole life. so take a look at that but i'm going to stop talking now and open it up for questions. but,. >> i think first to go to rebecca because they think nick very well laid out the problem and rebecca will talk about what we can do about it. >> you know what? i think you might be out. there you go. >> thank you.

>> why do you care about this issue? well, as members of civil society organizations, two ways it impacts you directly. one is that revenue loss to government around the world, the estimate is that the united states loses about $100 billion a year to tax evasion that is facilitated i tax havens. that is more than the spending cuts that were done last week in the budget deal. i think what we could do if we had that extra money here. you also care about the revenue loss to other governments around the world, and to government and other countries, and then of course the capital outflow of developing countries. i think it pointed nick makes really well in his book is that tax havens are just a sideshow. they are the show.

they didn't just contribute to the financial meltdown. they made it possible. the problem of tax havens is huge. now, what is a tax haven? a lot of people think it is just an island in the sun, right, where you can hide your money. typically be thought of tax havens of just having one or all of three characteristics. one, they have inc. secrecy. they have zero or very low tax rates, and they have a history of -- with other governments so they don't generally have tax information exchange agreements. budnick's definition in the book i think is much better. his definition of a tax haven is a place that seeks to attract business by offering politically stable facilities to help people or entities get around the rules, laws and regulations elsewhere.

elsewhere is an interesting word. the tax justice network and a 2005 estimated that wealthy individuals are holding about $12 trillion in assets offshore. the report estimated that government would lose $225 billion a year just from tax evasion by wealthy individuals. not corporations, just wealthy individuals. the level of financial integrity report that sarah and nick both alluded to, developing countries are seeing capital outflows in the range of a trillion dollars a year. now, let's talk a little bit about what is happening in the u.s. and since i assume that most of you aren't tax people and in fact tax is one of your least favorite subject today and

your returns. you guys have your returns, don't you? just a little bit of background about how u.s. taxes its citizens and multinational corporations. if you are u.s. citizen or resident or a company headquartered are formed reformed under the laws of the united states, you are tax on your worldwide income, your tax on all your income no matter where you live, no matter where you earn it. but you do get to offset your u.s. taxes with foreign taxes that you paid to other jurisdictions so if you have income that is also taxed in germany, that german tax is deducted from your u.s. tax. in addition to that, multinational corporations have something that we call deferral. there are ross says can be deferred and they don't pay u.s. tax and so they repatriate those products and bring them back into the u.s.. when we talk about tax havens,

you would hear to terms that some people tend to use interchangeably but mean different things, and that is tax evasion and tax avoidance. tax evasion is something that is clearly illegal. if they u.s. individual has assets offshore and those assets are earning income and the individual doesn't report that income on their tax return, that is clearly illegal. that is tax evasion. taxable income is a multinational corporation shifting profits offshore through aggressive transfer of pricing or other methods, shifting intangibles offshore for example. tax avoidance techniques are technically legal under the code. you can show me how you get there, but they violate the spirit of the law and in a lot of cases the line between tax evasion and tax avoidance is very different and i actually think you nick's book he said it

is the thickness of a prison wall. in addition to being taxed on the worldwide income u.s. individuals and u.s. multinational corporations are required to report their assets in foreign countries. so when individual on your schedule b if you have interest and dividend income you mark a little box that says yes, i have bank accounts in a foreign country and in addition you have to file what is called a report of a foreign bank accounts. the penalties for not filing are incredibly high and of course any tax due on income report includes interest and penalties. so, what is the irs in the u.s. government trying to do about the problem of tax havens? you probably all saw some of the news around the ubs case and the fact that they were able to get

ubs to identify a 4500 of its estimated 52,000 u.s. customers. just last week the department of justice issued a subpoena or as per a report to issue a subpoena to hsbc. the hsbc says it has 9000 u.s. premiere customers, which means they have an account that is over at least $100,000. but, according to irs records only 1900 of those accounts were reported last year on f bar reports. yesterday the first guilty plea in the hsbc case. a new york woman pleaded guilty for filing a false return. she told the irs on her report that she had $49,000 in her offshore bank accounts and she missed it by a little with a 8.3 million.

[laughter] now, sarah mentioned that i used to work for k. png. i was a cpa during tax returns for a living for about 20 years. that was a period of my life i referred to as working for the dark side. i didn't have any clients that have accounts offshore that i knew of but i figured if they were lying to the irs they were probably lying to me too. the irs in 2900 voluntary initiative that allowed u.s. citizens that had foreign bank accounts that had not been reported to come forward and to pay reduced penalties and to avoid the chance of going to jail. 15,000 u.s. citizens came forward and fast up to having offshore accounts. of the cases from that initiative that have been closed, the average amount of tax interest and penalties collected his $200,000 per case.

in february of this year, the irs announced offshore voluntary disclosure initiative and that closes august 31. if you have those foreign accounts pressure to fess up with the irs before august 31. the terms of this offshore initiative are worse for taxpayers than the last one. the irs is quoting they're not going to reward people for not coming in last time. the biggest incentive though is that coming forward hundred voluntary disclosure program will make sure that you don't go to prison. the irs is also really increasing the number of audits on high income taxpayers trying to ferret some of this out. the hsbc case actually came out of the 2009 initiative as taxpayers came in and fast up to their foreign accounts. they told of stories of hsbc

private bankers courting them and telling them, we will never report your account to the u.s. government. so, the irs and its voluntary initiative has gotten thousands of leads on banks, bankers, attorneys, accountants, company information agents that are facilitating the offshore transfer of funds and the irs is going after them. here in the u.s., legislation to help combat tax havens last year as part of the hire act, we got a foreign account, tax compliance act or fatcats as we like to refer to it. it has some good provisions in it, but we obviously would have liked to have seen senator levin and representative dodd had a bill called the stop tax haven abuse act that had much broader

provisions. they are planning to reintroduce that this congress with some changes. it has some really important measures in it are. it allowed treasury for example to prohibit banks that were facilitating, foreign banks that were facilitating tax cheating. it would allowed treasury to keep them from doing business in the u.s.. it would give the irs some great enforcement tools like your use of john doe summonses which is when they go in and say what we know somebody is cheating. we just don't know his name. and, it also has a really important expansion of the anti-money laundering rules. another provision that we would really like to see is that it really increases penalties on aiders and abettors. the firms, the bid banks, a lot are participating in these deals. penalties they can face are

fairly small. for an accounting firm it is $10,000 per violation. the irs was able to get ahold of it -- an internal memo of one of the big firms analyzing a particular deal where they said, our average fees per transaction are r. 360,000. are our maximum penalty is 31,000. well, i can do that math, right? the levin bill would increase the penalties to 150% of the gross income that the accountants and lawyers get from doing these kinds of deals, so we think that is critical. representative dodd also introduced a bill called the international tax competitive act which has some important provisions on multinational, and also introduced a bill to cut down on treaty shopping. so that is the problems from the perspective of u.s. as losing

revenue to people who are using tax havens, but what about the u.s. as a tax haven? the financial secrecy index ranks secrecy jurisdiction based on 12 key financial indicators and it waits those based on the level or the magnitude of the cross-border financial flows. when the last speaker -- secrecy index came out just who was at the top? delaware. the u.s., which is mostly in delaware and a lot of wyoming, places where you can open or you can form a company and not disclose who the beneficial owners are, not disclose who the -- your agent can be a nominee. the permanent subcommittee on investigations in the senate has done some really good work in this area and they found some things like this.

a utah company was involved in about $150 million of suspicious wire transfers and so the international or the immigrations customs and enforcement agency was trying to figure out where this money was coming from and what it was being used for. they found out that it was involved in a massive shell game involving hundreds of u.s. companies. the utah company had been opened by a delaware shell company, so they hit a dead-end. they were never able to figure out who was actually moving all this money around. and then the famous picture example, the guy who inspired the movie merchant of death, used florida, texas and delaware companies to make money and arms around the globe. u.s. states form about 2 million companies a year and most of those they don't collect

information on who the beneficial owners are. senator levin introduced a bill last congress called the incorporation transparency and law enforcement assistance act. he said tuesday when he spoke he wished he had thought of the edgier name but it would require states to obtain a list of beneficial owners of each liability company that is formed under their laws and make sure that is up dated annually. and make that available to law enforcement upon the service of a subpoena or a summons. and if those beneficial owners were foreign persons, the formation agent here in the u.s. would have to supply the identity. those pieces of legislation are really important and to the extent that you you do advocacy on the hill we have -- hope that you will help us support those.

>> thanks rebecca and thank you both. i think both both will turn it over to will turn it over to question-and-answer. i wanted to maybe start with a question for each of you. nick maybe we will start with you. much of this book, "treasure islands" talks about the enabling policy environment that allowed this offshore tax havens to flourish. i'm wondering if you could speculate on how we can go about changing this? is this the case where nobody wants to act first? this sort of competitive disadvantage argument. do we need to take a multilateral approach? he mentioned that she 20 and you mentioned the oecd. what is going to be the catalyst for actually starting a change in this? >> you put your finger on a very important question. i think there are two questions that we need to focus on about the whole offshore tax haven and treat them separately. first of all is the stuff good

or bad and i come out of my book unequivocally this is about -- and the second question is what can be done about it? it is pretty difficult to do something about it. but a more nuanced answer, think there is no magic bullet that is going to solve this problem. this is a problem that is not just about people in countries deciding to do certain things, although there is a lot of that. there's a kind of internal dynamic. these compete with each other to undercut other countries in order to attract money floating around in their people and tax havens saying what do we do and how we get that money? let's create a stronger form of secrecy or let's create a new tax loophole and we will some of that money and for ourselves. once one country does that then another country will say they have just on that. and they create something even more clever. so this kind of competition on tax financial regulations,

secrecy. but the problem here is that people seized on this word competition and they think that although competition is a good thing, now there are different kinds of competition. companies and markets, competition between companies and markets is on balance a very good thing. it results in companies producing better and cheaper goods and services for us. it creates efficiencies. competition between countries and financial regulations there are no economic relationship whatsoever to the beneficial kinds of competition. instead it is a race to the bottom. this is something we understand it when people talk about competitiveness, always call them out. say, what kind of competitiveness are you talking about? are you talking about the beneficial competition or are you talking about the harmful kind? and what we are talking about here is the harmful stuff, a

race to the bottom. so there's this problem of internal dynamic to the whole system, countries competing with each other and that can be the most difficult thing to deal with. in terms of the countries and policies that are the problem, in general terms people think the tax havens are a bunch of isolated sovereign countries all working -- like herding cats trying to get them to do anything. if we crack down here the money will go to singapore or hong kong or wherever. and always that argument. people often use the argument to say well then we shouldn't do anything about it and that is obviously an entirely bogus argument. the other thing to consider is that when you realize that most of the big tax havens in the world are under just a few countries, half of the global offshore system and the tax

havens are reddish in one way or another. so if you work -- that is no saturation at all and there is plenty of evidence in the book that lays this out. the united states in another huge player. and then there is a third player, the oecd which i mentioned earlier, which has been given the mandate effectively, the club of which country has been given a mandate to oversee international tax rules in particular. so we have really three players who, if you could get them, these are focused areas where pressure can be put. you can achieve an awful lot. so i think the united states is a very interesting case. i think my country is kind of at the moment it is rather lost. we have a right-wing conservative government that effectively loves tax havens. there is a building in the

cayman islands which barack obama mentioned in his campaign speech saying it is a tax haven in the cayman islands, a building that contains 13,000 companies and that sounds rather strange to me. while the cayman islands pointed right back and said, you guys, you think that is bad? there is a building on orange street in delaware that has 200,000 companies in it. [laughter] and i think people here kind of shuffled in their shoes and mobile david. so there is this problem, but the thing about the united states, sorry -- that point i was going to make was that maples and culver is the company that runs that 13,000 company building. john maples, one of the people who set up this british conservative politician -- we have this political problem in

britain. we are a captured state in a sense. there are people fighting against tax haven ray but we are steadily getting -- this tax haven thing is getting stabbed lee stronger in the u.k. and at least nowadays last year said they are changing public consciousness. the united states has always been a more conflicted country than britain. britain has been rather a sovereign tax haven. the united states states there has been a lot more resistance to the idea. there has been a lot more fight against foreign tax havens and also a fight by people like senator levin as a tax haven offering secrecy and saying, welcoming the dirty money or criminal money or whatever. so, this is you know what powerful democracy having a lot of trouble at the moment but this is an issue where i think there's a huge potential if people begin to understand the importance of this and how dangerous it is. i think we can get change and then we can really get real

change in the offshore situation. oecd is another organization that i think is susceptible to pressure. all of these things are very difficult when the long-term programs are required to address this stuff. but certainly there is plenty we can do. i can get into more specifics later if we have time. >> grade, thank you. rebecca, is one i guess on messaging. we have heard lots of policymakers go on and on about corporate tax rate and how that is harmful for u.s. businesses and yet you are painting quite a different picture of pretty successful tax avoidance practices. so, how do we change the debate so to speak and what are the messages that you think will resonate? isn't one of revenue chase -- generation? is the one of fairness? >> well the revenue message certainly is getting listen to now, with the legit that we are

having. i think it goes back to what nick just said about competitiveness. when you go into talk about these corporate tax rates, you get this pushback about well, how can our corporations compete when we have a 35% corporate tax rate and ireland only has 12.5% in the cayman islands have 0%. and i think we need to pushback just like nick said and say, well what do you mean by competition and what kind of competition is good and what kind of competition is just a race to the bottom? i think in the u.s., people have begun to recognize how much revenue the u.s. government is starting to find ways to curtail that activity. the harder question is to convince people that the u.s. should not get tax haven itself. >> can i add something to that?

the things they really interest them generally, you are going to be looking at has this country got an educated workforce? has this country got good infrastructure? has about the rule of law? has it got all the markets we need? tax will very often come sixth -- fifth or sixth on this list. really depends on the industry. it is really the top consideration industry. what companies are looking for when it comes to the rest of the country, what do they need? good infrastructure, tax, the rule of law and a good strong government. so to argue that if you just cut taxes on corporations, everything is going to be fine, is crazy. it is a whole complicated mix of

dings that companies are looking for and taxes are just part of it. then you get the problem if you start cutting taxes to foreign corporations then you will get wealthy folks increasingly shifting there their income into corporate forms and dodging their own tax systems. dodging their own taxes or cutting their own tax bills. so you have this competitive race that is forcing tax rates on mobile capital ever downwards. that is compressing our own tax taxes and making them less able to function. so this is democracy being undermined when voters say we want a tax system where the wealthy pay a decent amount of taxes. this is being undermined by what is going on. tax rates on capital. this problem of tax rates on the wealthy falling and other people having to pay to take up the slack to pay their taxes for them effectively is a huge problem recognized in this

100 billion-dollar figure. this is the hidden damage that they talk about. the 100 to -- $100 billion plus is just a very direct damage that has been happening. it is part of the whole process of globalization since the 1970s. this has been happening for many years and it is huge. >> thanks. so we will open it up to the audience for questions. if you could state your name and organization and just you know the microphone is for c-span and won't amplify. it is on though, i promise. >> on the question of the race to the bottom and the maligned competition, you point out that there is maybe two, three, four players that really control the game ad is now constituted so it may not be such a scary

landscape for taking on as it might appear at first glance. but i'm not sure you really do fairly respond to the concerns people raise about those who are outside the system growing in asia. you mentioned that earlier with regard to the hsbc for example but of course hsbc is a western institution operating in asia. singapore is obviously on the fault line. china is in a different mode. i wonder if you could talk a little bit, oecd doesn't have much influence and in the u.k. may be a strong ally in effect for those players. i wonder if the u.k. was somehow captured from the side of the good. you still have a large part of the world that isn't really subject to the forces you are talking about. >> yes, indeed her go that is sort of three things i identified and i deal with a

large part of the osher system. however the oecd and on the blacklist system you do have the asian players and they do have incentives to -- sanctions have been sanctions against countries that never had have been put in place and the actual, what is happened is very weak but if the oecd really started getting some realty this would actually have an effect on these players. it is true that you are not going to capture the whole system and there is still this problem with asian players who will be harder to control, harder to influence then say the british territories. but still, there is some -- youu know there's traction there. oecd brings traction and this is about localization. this is for me the greatest fault line in the whole global economic program of globalization and we are now seeing, just beginning to see countries as they start to understand this stuff better, look at ways of finding

solutions to this fault line. ..

. in europe, there's still some way to go. you're right. it's not something where these three players and there's influence and can get a long way on pushing in this area. >> good morning, i really want to thank you both for your comments on this, especially advancing the use of the term secrecy jurisdiction which i first heard from your colleague in 2000. >> it comes from the u.s. originally. there was a, i think, one the permanent subcommittees, care. >> that's okay. i appreciate that. a lot of our work on economic justice issues on the african continent focused on the vulture fund issues. we're seeing that with the

resource curse that applies to the drc which you commented is attacked in jersey now because jersey chose not to go along with the act in u.k., so i wonder if you can make comments on the issue and how the offshore and secrecy jurisdictions apply. >> okay. yeah. the vulture funds, so-called vulture funds which i prefer to call them disstressed debt investors or something like that. [laughter] they will go to a country and buy off its debt at pennys on the dollar or huge discounts, and then they hope they can through political changes get that, the value of that debt to increase. there is an example in my book where a fund manager who is now actually an economic come men at

a -- commentator, but he discovered people investing in he's funds were the elites from the countries and pulled strings making sure the central bank did pay, but initially invested in the fund, fund comes in, invest with us, we'll buy this debt for ten cents on the dollar, and you working in the central bank can either forecast what's going to happen or pull the strings so all the money is paid and everybody wins. secrecy was absolutely fundamental to be sure no one knew who was investing in this stuff, and it's a very difficult thing to investigate, but that, that story of his illustrates one of the greater things that's happening. you have -- this is a generalized problem of corruption. you'll have in countries in a

new telecom venture or there's a big western company investing, but alongside them is some company name to take 5% or 10% of the venture. you'll never find out who it is. one of the key problems there is that this will be a player in local politics who is not only able to profit from it, but is able to ensure that the market is rigged, that the market in the telecom or whatever is rigged. you might have three companies in the markets, but there's three players talking with each other and so prices for everybody else will be much higher, and this is something that would require serious research into this, but this is one of the great problems of what happens. there's a lot of market rigging

that goes on offshore, and one of the people i quote a lot in my book is john christianson, a practitioner in jersey and then became aware, interested in development issues, but he became aware of lots of market rigging going on in various forms in the offshore sector. people were able to manipulate market in these ways, but needed secrecy to do it so they went offshore, and that's what happened. >> open society foundations. thank you, both. that was extraordinarily interesting and alarming. you used the language too big to fail early on in the presentation, and talked about the importance of this patent to the maintenance of the u.s. deficit, and i'm just kind of

wondering, you say there's lots that can be done, but i wonder to what extent the u.s. can afford to clean this problem extent to which therefore is any prospect of the political decisions being made that would give you a real chance of seeing change, but i don't want to be a do monger but there is more that can be done with coherence than we could normally hope to expect. >> that's an excellent question, and in short, the answer to that is it's a question of timing. it's one of the first things talking to david spencer and other people when i was beginning to understand this is how the u.s. finances its deficit. that's one of the things, and the answer has to be it's a question of timing. deficit financing is a drug of. it fills -- [inaudible] the u.s. got itself into a

terrible situation, and it's difficult to wean yourself off the drug, and this money -- this money has been financing u.s. deficits for years, and it's a big component of what's been going on, the money that comes from secrecy. it's a big problem. you're quite right. right now, it's a very difficult political problem to address. over time with awareness of how dangerous this stuff is and how dangerous what is a drug is to the country, and all these other problems that it causes, it is -- people, you know, it is quite possible that people will begin to see that this is something that needs fixed, and i believe it will, but it will take some time. the deficit, you know, the deficit picture needs to change before the political world is summoned to do something. i think it will happen. >> if i could throw one in.

nick, i'm wondering if you could talk a little about switzerland. the chapter in your book on switzerland was incredibly interesting in that it erases a lot of conceptions that have been previously held. i'm sure people heard the same story i heard that the laws were created in order to help jewish people fleeing, trying to hide their assets from the nazis, and, in fact, it's almost completely the opposite, so i'm wondering, nick, if you wouldn't mind? >> yes. first of all, there is a lot more in the u.k. edition of the book on switzerland than the u.s. version. you see it in the newspapers frequently that switzerland put in place its bank secrecy laws making it a crime to break bank secrecy in 1934 and put in place

in order to protect jewish money against the nazis. in fact, historical research reveals that this story first started circulating i think in 1966, a swiss bank started putting in story out and journalists started writing about it. inin fact, the real story why bank secrecy was put in place, there's long been secrecy, but will not had the law criminalizing, giving out to switzerland has been neutral and people put there money there and know that geneva bankers keep secrets hidden, so it's always been a problem, but in 1934, that's when the law came in. the real reason was a tax evasion scandal in france. the senior officials in france, a general, the owner of a

newspaper, i think a priest, and very high profile people in france were discovered on a police raid in paris to stash huge amounts of money in switzerland, and that's what led to the bank secrecy law. that's something important to correct so when journalists write this is the reason the money was put here, it was not out of concern for the victims of the nazis. if you look at actually what happened in the second world war, there was -- the swiss population had been very hostile to the nazis, but there was a significant collaboration going on there so it's a very ugly picture in switzerland. that's an important myth to dispel when you see it in writing. >> scott clinger with business

investors against tax haven abuse. thank you for your presentation. one thing you mentioned is there's over trillion dollars in u.s. corporate profits offshore and the u.s. is considering allowing the money to come home with a tax holiday similar to the one in 2005. is that linked to tax havens? >> absolutely. i think rebecca's organization did specific work on this. i'm not going to answer -- you can if you want. >> tax havens made that possible. we talked about how multinational corporations try to shift profits offshore, and the u.s. tax system doesn't tax those foreign profits until they repatriate them back into the u.s.. well, as long as that's not getting taxed, they have an incredible incentive to ship profits offshore especially into a jurisdiction that doesn't have a corporate tax, so there's a

big lobby push going on right now by a group called win america campaign that is trying to get congress to een act a repatriation holiday to allow multinationals to bring the money back to the u.s. and instead of paying 35% tax, pay 5.25% tax rate on it. now, this is bad for all kinds of reasons. one of which of course, is it continues to encourage multinationals to shift profits offshore if they think every five years congress will give them a tax holiday, but the other thing is that it benefits the worst corporate actors. if you're investing overseas and making oil wells or a plant, it's not all that easy to repatriate the profits back to the u.s.. it could involve selling some assets, but if you just shift

profits on paper by putting your brand in another country or the patent in the cayman islands, it's easy to bring the cash back when congress gives a repatriation holiday. another thing we mentioned earlier is corporations get a credit for any foreign taxes they've paid on that income. well, even in ireland the tax rate is 12.5%. if you make the rate as low as 5.25%, people that really benefit are the ones that are paying zero tax on foreign profits somewhere, and now nay bring all that back to the u.s. with 5.5% instead of 35%. it's a horrible idea really. it has a lot of traction on the hill and it has very powerful lobby working towards it. >> i think it's important when we talk about corporations avoiding tax. we also came up big

multinational corporations, the main users of tax havens, and as a result of being able to use tax havens to cut tax bills, they are able to out-compete smaller businesses for reasons that have nothing to do whatsoever with efficiency, and it's just about the transfer of wealth, and if you look at your high street and the dominance by multinational -- >> main street. >> main street, sorry. i'm british. main street. [laughter] there are many reasons why they can outcompete smaller businesses, economies of scale and things like that, but this factor tax is a very important one, and a lot of small businesses have been killed by this, and for no good reason. this is not because multinationals are producing better products or better services. it's because they are getting the effective tax subsidy. in the u.k. in my country, on

our books, we have the death of little record stores. one of my favorite films, i don't know how many of you saw it, but that community store, these places are getting killed because big retailers can go off to jersey and ship their goods from jersey and not pay the vat on it, and loads and loads of these little high fidelity stores disappear just for that reason, not for any otherment it's a big problem, and this is not, you know, i don't see this of an issue really to go about the corruption of markets, distortions in markets, an agenda to be taken on by both sides of the political debate, and it should be. this is bad stuff that's happening, and it's getting

worse. >> other questions? >> end us on a high note, come on. [laughter] >> okay. well, on a high note, i think as i touched on earlier, we have had this problem, the offshore system tax haven scene, for some years as an exoctoberric side show. there's a few criminals doing stuff in the islands or wherever. we are now beginning to see the system for what it really is and how important it is. it has been ignored. we are now in a phase of education, and that phase has a little way to go but it's essential word gets out and we pay attention. almost the entire economics profession pays no attention to the issue. where there have been reports,

usually it's partisan reports, often cited by corporate interests. thankfully now, there are some groups outside of the picture. i think treasure island fits into that side of things, and we are beginning to see globally and in europe there's been a big growth in consciousness. i think in the united states we still need to go along way with this, but i think now with all the problemmings of deficit and arguments going on about tax, this is kind of a slam dunk. this is what people need to look at, and it's a political issue, an economic issue, and it's a great moral issue, and i think once we show people how important this is and how bad the system and dangerous the system has become, we can really make progress. >> i have to say the next book is incredibly fascinating. it's something you will get into and just be pulled into it, and it's depressing though. [laughter]

you know, you get the history, you get the sense of the power and the magnitude of the problem, and you wonder if there's anything that can be done, but thankfully he ends the book with nine suggestions, and they are very good ones, and a lot of them are about just getting people to be aware of the problem first of all, but to change the mind set of how people talk about these issues. i was calling it healthy tax competition, you know, we can call them the tax cheaters lobby on the other side. >> you raise a good point, and it reminds me in nick's last book, "poisen the wells," the last chapter talked about transparent -- transparency and the dirty

politics of african oil as the subtitle suggests, and when the book came out it seems as the issue we're talking about today does intractable, that solutions were too far in the distance to even contemplate, the components were too large, the folks fighting for it was too small, and yet since the book came out, there's been a huge victory in part of the dodd-frank financial reform package, there's a small provision that now mandates all oil, gas, and mining companies publish payments to every country in the world for their natural resource extraction. when that was out and i read it, it was great to see, but also seeing a little bit of a pipe dream, and yet, here we are just a few years later, and it's a reality. i hope that in a few years time, we'll be back with your next book saying how the tax haven problem has at least been addressed from one end or the

other, so we shall see. >> that's an important point that i had a similar feeling when in idea of companies reporting on a country-by-country basis and when it first came out, people scoffed at it. the united states has taken a leadership position on this issue and the united states because it has such a widespread democracy with 70 voices, i think it's in a good position to take a leadership position on this issue, and i think it will. i hope at least. >> i like that optimism. i think the first step is changing the don't. it's not about as you call them the palm tree islands. it's about the u.s. and the u.k., and your book will hopefully start changing the way people think about tax havens. thank you, nick and rebecca, and thank you all for coming. [applause]

[inaudible conversations] >> is there a nonfiction author or book you want featured on book tv? send us an e-mail at booktv activity -- >> next, talking about home grown terrorism in the u.s.. this is about 45 minutes. >> host: fox news national correspondence, catherine herridge joins us. >> guest: thank you for having me. >> host: hunt for the next american al-qaeda's recruits. you cover terrorism, you were in new york when 9/11 happened, covered in the years since then, and you start off the book by asking a question. you share a note of being done at guantanamo and you ask who is in control, us or the terrorists? why is that?

>> guest: i try to take you along in the investigations. i take you into the courtroom, fort hood, san diego, parts of virginia to investigate the new generation, i call it al-qaeda 2.0, and there's sort of a tension in the book who is in control, us or the terrorists? what we see with the new generation is they are really using technology against us in a way that we never saw a decade ago. i call them the new digital jihaddists, and the person at the center of that is amwar and whether he's e-mailing or blogging or lectures that are youtube, he's like the facebook friend from hell, and that's how he spreads this ideology of hate. >> host: you have linked him in a variety ways throughout the book to a lot of the terror suspects and terrorists who have perpetrated things over the last decade. take us through how connected he is at the center of the web.

>> guest: one of my colleagues asked me after fort hood how is it americans old enough to remember 9/11, less than a decade are willing to turn their back on their own country. that question gave me pause because myself i thought back to 9/11, saw the collapse of the towers and pennsylvania and the pentagon, and the more i investigated and found, you had the finger print of this man who has become a household name, but at the time was unknown. what you see in the cases like the case in seattle last week is these individuals who are home grown or self-radicalized, they are followers of his lectures and ideology on the web. >> host: he knew some of the 9/11 terrorists, and he is someone who went to engineers school here in the united states, born in the united states, went overseas, came back for school, and became a leader. how has he been able to make

these connections and find people who are interested in his message? >> guest: well, one of the major, i think, revelations in the book is that based on interviews with the agents who followed him after 9/11 and some recent declassified documents, to me, the evidence is really overwhelming that he was an overlooked key player in 9/11 itself. i begin that part of the investigation a year ago interviewing the commissioner of 9/11 who said to me, there's always been a question that the commission and the investigators and these people are two of the hijackers in the united states in january of 2000, and one said to me, why could he send two of the most experienced operatives who spoke no english, not only to southern california, but to the ghetto of san diego unless there was someone there to meet

them and that was anwar. he was born in new mexico, left as a small child, went to yemen, came back here for the college education and became a leader and met with the hijackers, and i've been in the room where they met, and it's a small and private place, and the documentation shows that his contacts with the hijackers not only in san diego, but the mosque here in virginia were not a series of coincidences, but really evidence of a purposeful relationship. >> host: catherine herridge is the guest, national correspondent with fox news and talking about her new book. how real is the threat of home grown terrorism in the united states? we heard a lot in the past decade about people coming over from overseas. you mentioned some of the 9/11 hijackers spoke no english. you're writing about a new generation that you call 2.0, people born in the united states

or are second generation -- >> guest: right. >> host: how do you perceive that threat? >> guest: bin laden's death was the end of the story on the war on terror, but this next chapter may in fact may be harder to fight because in the center there's american citizens whether it's the anwar and the affiliate in yemen is the last two attempted attacks in the united states, the underwear bomber and the printer plot last year and the al-qaeda affiliate in somalia where there's an american senior in the ranks who is from alabama. what i argue in the book is that the next chapter is really this new american generation, and this group in particular is a group that understands us and understands our systems and how to use the systems against us, and there's one example, you remember back to the cargo printer bomb plot and the idea was these would detonate over

the eastern sea board of the united states and one of my counterterrorism contacts said to me that he believed that the devices had been timed based on the fedexor ups tracking systems on the web because there was a dry run earlier in the year. you know, only an american thinks about uses the web tracking system for packages to launch a plot like this. you see the threats of the future are not on the same scale as 9/11, but there's a component more insidious because they understand our systems, and they understand us as well. >> host: let's get to the friends. ryan from maine on the independent line, good morning. >> caller: good morning. >> host: hi. >> caller: the most insidious thing is when the media refuses to look at the history of things, reports that anwar dined at the pent gouge after 9/11 and refuses to follow is it up and the very idea of freedom, and so

i wish you would straighten out the obvious contradictions in the story about the supposed new emanuel goldstein character. anyone around the world who looked into it these have been myths perpetrated on the united states, 9/11 was to reduce our ability to be the sovereign individuals and sovereign nation. could you comment on his lunch at the pentagon? >> guest: i was the reporter who broke that story about his lunch at the pentagon and as you know, you followed it, that was in february of 2002, and what i show in the books through documents, is that he was a guest of the office of general counsel and nearly 80 people were invisitted to that lunch. what i think is important here is that it shows to me a pattern. at that